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Fodder for Thought

Profit Is Job One For Beef Producers

Beef producers still struggle with putting production concepts above net profit.

Recently I posed this question to beef producers in my social media circles:

If you could only know one statistic about your farm/ranch with which to make management decisions, what would it be?

I received a multitude of answers from stocking rate, rate of gain, to annual rainfall. While I agree these are important numbers to know when it comes to making management decisions, if given the choice of only one statistic with which to make the best management decisions possible and ensure my future profitability, I would not choose any of these.

That's because the aforementioned answers were given with only production in mind. The last I checked, raising cattle is not just about production. In the end it is a business. Being so, it should be run as one. That means success is dependent on a profit-oriented approach.

To ensure a profit as a beef producer, knowing your cost of production is ultimately the most important factor you need to know. Cost of production includes both annual cow cost for cow-calf operations and cost of gain for stocker and finishing operations. In addition, it is important to note that your cost of production per unit of output, such as per calf or per pound of gain, includes not only feed costs but also expenses for things such as veterinary care, transportation, and even the time and labor you expend to produce that output.

I have read multiple times that less than 10% of all cattle producers actually know their cost of production. This statement supports the case that of all the answers I received, only a few were given with profitability in mind. Even more disturbing was the fact only one of those answers was from a U.S. producer.

Why this is the case, I do not know. But I do know it is very hard to manage what you do not measure. Without knowing your cost of production, it is difficult to reduce costs and ultimately, to increase profit, as you have no idea where to begin.

A business in any other industry would not think twice about determining the cost of production for their product or service. So why are such a majority of cattle producers so indifferent to this vital information?

Production statistics will always be valuable things to consider when making management decisions. However, let us not forget that we are still running a business. In such volatile economic times as now, business savvy and a profit-oriented mindset are more valuable than ever.

In the end, when the economics of beef production become challenging, those who know their cost of production and manage to ensure a profit will be ones on top.

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